The Malawi’s central bank, the Reserve Bank of Malawi (RBM) has announced adjusting upwards the policy rate by two percentage points from 22 percent to 24 percent.
A policy rate is the rate at which commercial banks borrow from the central bank as lender of last resort.
However, as a key driver of interest rates on loans, the decision will have ripple effects as commercial banks will likely implement reciprocal adjustments to the price of loans.
Reserve Bank
In a statement published on Friday, RBM Governor Wilson Banda said the Third Monetary Policy Committee (MPC) Meeting revised upwards the policy rate by 200 basis points as price pressures have intensified, such that inflation is projected to remain substantially above the medium-term target for longer.
Practically, the decisions mean that the RBM is trying to reduce money supply in the economy by increasing the cost of borrowing.
This comes at a time authorities are battling a high inflation rate recorded at 27.3 percent as of June, according to National Statistical Office (NSO).
Shared Interest’s Partial Credit Guarantee is a Game Changer for African Businesses US-based nonprofit guarantee fund is dedicated to supporting black female entrepreneurs and small businesses MALAWI, Africa, June 18, 2023 .
Entrepreneurs need financial resources to start, expand and innovate their businesses. However, a 2018 World Bank report revealed that merely 13% of small businesses in Malawi have access to formal financial services.
Consequently, a significant portion of the entrepreneurs leading small businesses lack access to credit. The report further reveals that women, rural entrepreneurs, and individuals involved in the agricultural sector are disproportionately disadvantaged in terms of financial inclusion.
The primary reason behind this exclusion is the lack of assets typically required as loan collateral among small businesses in Malawi.
This is why organizations like Shared Interest, a US-based nonprofit guarantee fund, are dedicated to helping black women entrepreneurs and other small and medium-sized businesses.
They provide these businesses that are leading the way in driving innovative solutions for agribusiness, women’s entrepreneurship, green jobs and inclusive housing with credit guarantees.
A credit guarantee is a financial arrangement in which a third party, often a financial institution or government agency, assures a lender that a borrower will repay a loan.
They are typically used to support lending to small and medium-sized businesses, along with other borrowers who may lack sufficient collateral or credit history to qualify for a loan independently. Dorcas Onyango, the Global Director for Programs, Shared Interest said, “Shared Interest unlocks local resources for entrepreneurs who can drive entrepreneurship, job creation, community well-being, and national economic growth and development.
In 2020, we guaranteed a loan of US$ 459,000 from Malawi Agriculture and Industrial Investment Corporation (MAIIC) to Lenzimille, an animal feed producer, to set up a fish meal production facility in Blantyre that has potential to contribute to increased earnings by soya and maize farmers who will provide inputs well as to import substitution.
Shared Interest offers partial credit guarantees, covering up to 75 percent of the loan. The terms of the guarantee, including the amount, duration, and the circumstances that would activate it, are negotiated with the lender and specified in a formal agreement.
Shared Interest is encouraging and enabling lending to small businesses in Malawi, with a focus on black female-owned enterprises that may have been deemed high-risk. In 2022, Shared Interest offered FDH Bank and MAIIC a partial credit guarantee of US$1,000,000 each.
For credit guarantees to be most effective, businesses must be operating at their best. Shared Interest goes the extra mile by offering technical assistance to both lenders and borrowers.
They help lenders build their knowledge in SME banking while assisting small businesses in adopting strategies that reduce perceived risks. Recognizing the breadth of challenges that emerging entrepreneurs face,Shared Interest collaborates with other organizations that offer complementary support programs to assist small businesses in scaling their enterprises and increasing their community impact.
Shared Interest’s work in Southern Africa, including Malawi, is made possible thanks to the support of many impact investors and donors based in the US including faith based communities, corporate foundations and individuals.
These organizations provide the necessary resources to back up a letter of credit issued by CitiBank on behalf of Shared Interest.
Locally, its ability to reach and assist eligible small businesses is strengthened through partnerships with lenders, civil society organizations, and umbrella bodies. For example, The Joyce Banda Foundation is empowering women with the needed skills and information to start and manage businesses. Eligible entrepreneurs may benefit from the availability of loans guaranteed by Shared Interest. After signing a credit guarantee agreement, the lender can proceed with processing loans and disbursing funds to eligible borrowers who can generate the impact desired by the guarantor and impact investors. Should the borrower default on the loan, the lender can seek reimbursement from the guarantor by filing a claim to recover the outstanding amount. Provided the lender meets the conditions stated in the guarantee agreement, the guarantor will make a payment to cover the remaining balance.
Credit guarantees require ongoing monitoring of the loan portfolio and reporting of borrowers’ financial performance to minimize risk for the guarantor.
Shared Interest engages local SME banking experts to evaluate borrowers’ creditworthiness, track loan portfolio performance and the social impact of the guarantee since its primary goal is to maximize community impact by scaling and strengthening profitable businesses that can deliver measurable social value as part of their core model.
Malawi Police in Chikwawa are keeping in custody two men on suspicion that they were on Tuesday involved in the setting ablaze of Chapananga Police Unit and stealing various items there.
Chikwawa Police Station spokesperson, Dickson Matemba said the two are Fredrick Chiphaka, 28, from Liyada Village in the area of Traditional Authority(TA) Mpando in Ntcheu and Evance Malefula, 27, from Chaphinja Village in the area of Senior Chief Chapananga in Chikwawa District.
Matemba said the two were allegedly spotted during a fracas that erupted when people around Chapananga Trade Centre invaded the police formation and demanded the release of a suspect arrested for the murder of Chimwemwe Hamilton ,18, from Garonga Village in the area, for them to deal with him.
He said the angry mob resorted to violence after they learnt that the suspect had already been transferred to Chikwawa Police Station. In the process, the mob torched the police unit and blocked the road leading to the facility with stones and trees.
However, officers from Chikwawa Police Station and Mitole Police Mobile Service managed to get to the place and calmed the situation.
According to the police publicist, investigations are underway to arrest more culprits related to the matter. He went on to say value of the damaged property is yet to be established.
Chiphaka and Malefula are expected to answer charges of arson, theft and malicious damage after the completion of investigations.
Press Corporation plc (PCL), through its subsidiary company PressCane Limited, has invested K11 billion in an ethanol plant which will produce high-quality potable ethanol to be used in the pharmaceutical and beverage industries, with some intended for the export market.
PCL Chief Executive Officer, Ronald Mangani, said in an interview yesterday that the ethanol plant will also have a component of Zero Liquid Discharge (ZLD) capable of producing fertilizer, bio-gas and electricity from the waste of ethanol production.
“We are in the process of upgrading our versatile ethanol plant at PressCane Limited which will enable full utilization of its production capacity of 60,000 litres of ethanol per day. This can be used for fuel blending and, more importantly, high-quality potable ethanol called ‘pharma-grade’ which can be used in the pharmaceutical and beverages industries, apart from exporting it to bring in the much-needed foreign exchange into the country,” said Mangani.
PCL Chief Executive Officer, Ronald Mangani
He explained that the company has made an investment of K2 billion in the ‘pharma-grade’ potable ethanol production plant, and a further K9 billion in the ZLD plant.
“The good thing with pharma-grade ethanol is that it is pure, and we are excited to introduce this new product because we are responding to the demands of our customers who desire a better-quality product, especially those that want a product that is capable for use in beverage and pharmaceutical production.”
“We are already in talks with foreign customers to export the product, and this will be good for our country especially now when we are having foreign exchange challenges,” said Mangani.
He also said the ZLD plant will make sure that PressCane is environmentally friendly in terms of its waste disposal as the plant is capable of producing fertilizer, bio-gas and electricity from the waste of ethanol production.
“We are happy that, with the fertilizer that we will be producing from the ZLD plant, we will save some of the forex used to procure fertilizer from outside Malawi,” said Mangani.
He further said under the pharma-grade project, PressCane will bring an additional standalone unit to process hydrous alcohol to produce an additional 30 kilolitres per day (KLPD) of anhydrous alcohol (AA).
“The unit will be capable of improving the produced AA to a quality suitable for both pharmaceutical and beverage applications. This investment will, therefore, increase annual AA production from the current 13 million litres to 18 million litres. In addition, the company will be capable of producing 7 million litres of potable ethanol in a year,” said Mangani.
Before ascending to power, President Lazarus Chakwera promised Malawians that his administration will deliver social and economic development, which will translate into better and uplifted lives for common folks in town and villages across the country.
Today, that promise is sprouting into a sweet rounded story of development initiatives taking place across the country. This development includes infrastructure, human development, social protection, Agriculture, energy and other various forms of development in between.
Social Protection Programs
Under President Chakwera, the government introduced various programs aimed at cushioning the impact of shocks and global factors on the Malawian ultra poor. One of such programs is the Affordable Inputs Program (AIP), which is meant to provide poor farmers in the country with agriculture inputs to become food sufficient at household level and also some to sell.
The government also made improvements on the Social Cash Transfer system, which is a program introduced by the previous government but significantly improved under the government of President Chakwera. Under this program, poor households are provided with some cash on a regular basis to allow them access to basic stuff such as food and clothing.
The program is also meant to cushion poor households against the pangs of global factors that cause prices of commodities to rise. The Tonse Alliance government increased the number of beneficiaries on the program on top of increasing the amount paid to individuals.
On top of this, the Chakwera government is also distributing items such as bags of maize to ultra poor households to help them see through the lean period.
Agriculture
Mega farms have been thought to be one of the ways through which this country will be able to solve the problem of perpetual hunger and food insecurity at both household and national level. Mega farms will be a major source of employment for Malawians, particularly youths in the rural areas and semi-urban centres.
Currently, some Nega farms are already operating with some under way in Chipoka, Salima, Nkopola, Mangochi, Katunga- Maseya in Chikwawa under Agriculture Commercialisation and Mega Farms owned by the Malawi Defence Force and Malawi Prison service.
There are also other Agriculture Commercialisation projects in the Lower Shire like the Intensive irrigation projects under Shire Valley Transformation Project, and also other schemes across the country such as in the Wowo in Phalombe, Lingoni, Matoponi, Mafinga and Marko in Chitipa, Mlooka in Zomba, Ukanga, Wovwe, Mphinga, Chonanga, Hara and Mzenga
These are some of the projects that are being implimented under agriculture commercialization in order to create value in the whole agriculture value chain.
Tourism
The Government of President Lazarus Chakwera understand that tourism is key to the social and economic development of the country, and could be a major foreign exchange earner for this country in the medium to long term.
This is why some transformative radical changes have been made in the tourism sector under President Lazarus Chakwera. In January 2023, the government introduced a VISA waiver applying to nationals from key tourism markets such as the United Kingdom, United States of America, the Netherlands, Germany, Australia, Belgium, Italy, France, Poland and Nordic Countries, which include Norway, Finland and Sweden.
Negotiations and plans are also under way to introduce direct flights into the country from these major tourism markets. On top of this, the road networks to key tourism sites are being comprehensively improved.
The Ministry of Tourism also launched an international media marketing campaign in strategic places and through strategic personalities and platforms in order to woo as many tourists as possible to the Malawi destination.
Mining
In realizing the importance of mining in the overall development of the country’s economy, the government established the Mining Regulatory Authority in a bid to bring order and sanity to the industry, and to ensure that the country does not lose its precious minerals to crooks under the alias of international investors.
The establishment of the authority brought about the establishment, capitalization and operationalisation of the National Mining Company under the Ministry of Mining to take care of some of the major government investments in the mining sector, particularly in ensuring that Malawians are benefiting from mineral resources under their feet.
The Malawi Congress Party led government is also currently reviewing poorly negotiated mining agreements on top of constructing a state-of-the-art mineral processing laboratory complex to carter for the sector. The Reserve Bank of Malawi (RBM) has also been given a new designation to manage the gold market with the purpose to ensure that proceeds are well accounted for, and that traders are earning decent incomes from the same.
Trade and Industry
The trade and industry sector is by no doubt the crux of the economy because the private sector is the engine of economic growth. The MCP led government under the wise stewardship of President Chakwera introduced One Stop Border Post at Mchinji-Mwami Border as one way of ensuring easy clearing of cargo by traders and also to boost revenue collection by the government through Malawi Revenue Authority (MRA).
This is also the case at Dedza-Colomue and Mwanza-Zobue Border Posts. The Ministry of Tade and Industry has also put in place measures to regulate the exporting of legumes such as pigeon peas, soya and beans as well as fresh vegetables and maize flour to ensure that farmers are earning a decent income and that the resultant forex is not wasted by crooks
*This is one of the entries in a serious of entries compiled to demonstrate the commitment of President Lazarus Chakwera and the MCP led government to the national development agenda of the country. The author compiled it in his personal capacity*
